Business leaders expect to escape major impact from Detroit bankruptcy

Business leaders said Thursday Detroit's long-awaited bankruptcy filing was necessary to get the city on stronger financial footing, and Wall Street analysts don't think it will have major implications for the $3.7 trillion municipal bond market.

"We look at this as going into surgery," Detroit Regional Chamber President and CEO Sandy K. Baruah said in a telephone interview. "No one looks forward to it, no one says it's going to be painless, but at the end of the day, you know you have to do it."

Executives at major firms based in Detroit, including General Motors Co. and DTE Energy, said the filing would have no impact on their day-to-day operations.

Peter Hayes, who heads BlackRock's Municipal Bonds Group, which oversees $114 billion in municipal bond assets, said the timing was a surprise. But he downplayed the impact on the broader financial market.

"The negotiations from here are likely to be long and complex, offering no resolution or clarity perhaps for years," Hayes said. "Ultimately, it's important for market participants to understand that Detroit is the exception and not the rule. This is first and foremost a Michigan issue, not a systemic municipal market issue."

Former Obama White House auto czar Steve Rattner, a Wall Street veteran, said in a Detroit News interview that Detroit's bankruptcy won't have a major impact on municipal finance. "I don't think there's too many municipalities of consequence that are in Detroit's state of mind. Markets tend to forget very quickly," he said.

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He said there will be some added "risk premium" to cities that concern Wall Street. Others think the case may set precedents for other troubled cities that are eager to restructure their debt.

Michael O'Callaghan, chief operating officer of the Detroit Metro Convention and Visitor's Bureau, said the organization will "continue selling the destination as a great spot for conventions and meetings. We believe going into bankruptcy will ultimately be positive for the region and get us on track."

He conceded that the filing will "make it a little more difficult" to attract visitors.

GM, which filed for bankruptcy protection in 2009 and emerged a stronger company with less debt and fewer brands as part of a $50 billion U.S. bailout, said it does not expect Detroit's bankruptcy to impact its plant and headquarters operations in the city.

"GM is proud to call Detroit home and today's bankruptcy declaration is a day that we and others hoped would not come," the automaker said in a statement. "We believe, however, that today also can mark a clean start for the city."

Meanwhile, Dearborn-based Ford Motor Co., which has no plants or offices in Detroit, said it is "optimistic that governmental leaders will be successful in strengthening the community."

"We not only continue to invest in the city and its residents by adding to our presence in Detroit, we also are committed to playing a positive role in its revitalization," said Chrysler Group LLC, which has thousands of workers in the city.

Dan Gilbert, chairman of Rock Ventures and Quicken Loans and a major booster and believer in downtown Detroit, called the bankruptcy filing "the first step toward a better and brighter tomorrow for our city."

"Bankruptcy will be painful for many individuals and organizations but together we will get through it and come out stronger on the other side," he said in a statement issued by his office.

"Just as the auto companies reinvented the way they do business, so will the city of Detroit. Once our financial challenges are behind us the city, region and state will have a clean slate to operate with a philosophy and strategy that works for its citizens, businesses and the entire community."